Category: Saving Money (page 1 of 3)

Is Vanguard Getting Too Big?

I hope everyone had a great weekend. Here at Ridinkulous HQ, it was Eurovision weekend, of course. We had some friends over so we could introduce the Eurovision madness to others. Maybe you’ve heard, but the Muppety man with the huge suit from Portugal won the contest. He was very good, but this year we were a Moldova house. After all, it featured the return of the Epic Sax Guy. They came in third place!

Then when the sun was shining (and Eurovision wasn’t on) I worked outside on a DIY lounge chair. During the warmer months, all I want to do is sit outside and read. Right now all we have is some patio table chairs. But I want to stretch my legs out, so I figured a lounge chair would increase my leisure comfort about 50%. But lounge chairs are expensive! So I found plans online and made that my new project. I had a lot of the wood on hand already, so it should be pretty cheap, and hopefully very comfy.

Now for the actual financial part of our post…

If you read any personal finance blogs, including this one, you know Vanguard pretty well. They are the dominant name when it comes to broadly-diversified low-cost investing.

They provide cheap, easy access to the stock market as a whole. It’s a no-brainer to use them, since we know that the average active investment mutual fund will underperform a passive investment fund, especially after accounting for the fees.

I had been hearing recently about how passive investing has really taken off. That even your average, middle class investor understands that this is the way to go. But it wasn’t until reading an article in the New York Times that I realized just how dominant Vanguard has become. (We shell out $7.50 a month for a Times online subscription, but it’s worth using one of your precious ten free articles a month on this)

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How Much Money Can You Make With StepBet? (Part 1)

Like so many other people, a few years ago Marge got a FitBit for Christmas. Fitness trackers were suddenly taking off and she immediately got obsessed with beating her friends’ daily step goals inside the app. Really, it was bad. Like, pacing-around-the-kitchen-at-10PM bad.

Her obsession has tapered off since then, but she’s of course kept up with her 10,000 step daily goal in order to be more Amish. But her obsession has grown anew when her friend told us about an app she’d been using called StepBet.

According to their website, StepBet is a “fitness game that motivates you to be more active.” Players basically put their money on the line as encouragement to get themselves moving. If you don’t hit your targets, you lose the money, and it gets paid out to everyone who does complete their goals. You can imagine where my interest comes in.

How much money can you make with StepBet?

The way it works is you basically pay in $40 to the pot. Each game lasts six weeks, although the first week is a “practice week” and no one gets eliminated, so there are five competitive weeks. The app calculates for you an Active Day step count goal and a Stretch Day goal based on your prior activity.

You have to hit four Active Day goals and two Stretch Day goals each week, with one day left over for “rest.” If you miss any of your goals, you’re eliminated. But as long as you keep completing your goals, your app displays how many players started the game, and how many of these foes you have vanquished!

There are risks, though. Besides getting lazy, I imagine the biggest one is something going wrong with the technology. What if your FitBit doesn’t sync to your phone, or your app crashes, or it doesn’t connect to the website? Or what if you get injured and can’t walk as much? Apparently they have “referees” to deal with this, but I would still be worried about losing my money through no fault of my own.

Marge joined a game at the beginning of last week. Here’s her progress screen as of Saturday:

Her normal goal is almost 11,000 steps a day, and her stretch goal is over 13,000 steps. That’s a lot of steps. But as you can see, she goes far beyond the stretch goal, so I wouldn’t bet against her. The real question is how much money will she make in the end? Here’s what the game’s stats look like as of Saturday:

The total pot is $48,160, with 1,204 players putting in $40 each. As you can see, 41 players had already been eliminated by Saturday. Weaklings!

So if we divide the remaining pot among the 1,163 players, they should get $41.41 back each. That is, if StepBet itself didn’t take a cut. Aye, that’s the rub. According to their website, StepBet “retains 25% of the gross pot to pay Referees, transaction fees, game hosts, and administrative support.”

The website’s FAQ also says StepBet “has a No Lose Guarantee so that you’ll never lose money if you reach your goal. If the StepBet challenge has an unusually high percentage of winners, we will forfeit our portion of the pot to ensure that all winners get their money back.” That sounds to me like you might not get any more than $40 back even if 25% of the contestants are eliminated.

If I’m following them correctly, their take from this contest would be $12,040 (25% of $48,160). That leaves $36,120 for everyone else. So if anywhere from 903 to 1,163 contestants remain, divide the $36,120 among the winners, they would get less than $40. StepBet would forgo a bit of their fee in order to get the winners up to $40. The only way you get more than $40 is if there are fewer than 903 winners.

How exactly will it pan out and how much will it pay out? We’ll have to see in about four weeks. Although I would think the outcome of this contest should be indicative of StepBet contests on the whole. 1,200 contestants is a good sample size, so it should demonstrate what the average drop out rate is. Then we can figure out what the rate of return is on this most odd of financial instruments. Even a couple dollars would be a good return on $40 over five weeks.

Anyone else put your money on the line with StepBet?

CDs Ladders for Emergency Savings… And Beyond!

Hey everyone. Exciting news today. We’ll be talking about CDs (Certificates of Deposit) and how I’m thinking about using them!

We haven’t owned any CDs for probably ten years. It was one of the first investments I made after graduating from college. Back then, you could get a one-year CD that paid over five percent! After the bottom fell out of the economy, the rates dropped like so many bricks, and they weren’t worth bothering with. Besides, we had more important things to put our money towards, like buying a house and investing for our retirement.

Today, we basically hold most of our financial assets in retirement accounts, whether it’s my 457 Plan, Marge’s traditional IRA, her 401(k), or our Roth IRAs. Then we have some taxable investments, which is the Vanguard Wellington Fund and some individually held stocks. Then there is the Cash Equivalents, which is the Vanguard Prime Money Market Mutual Fund (MMMF). And then there’s Lending Club.

The MMMF (Cash Equivalents) functions as our emergency fund. It includes 8 months of expenses, plus some savings for our rental property, our tenants’ security deposits, plus more to pay big bills like property taxes and home insurance. So there’s a lot of cash in there.

Our taxable investments  are the Wellington Fund and some individual stocks. They spin off some fun dividends and capital gains, and although that can be annoying at tax time, it’s not a ton more income that we have to report. I always look forward to the Wellington Fund’s year end distributions and call it our Christmas present.

I have started winding down our Lending Club investments. About a year ago, the default rate on my portfolio started going up. So for the last six months, I’ve been taking withdrawing our payments and putting them in Vanguard instead of reinvesting in more Lending Club loans.

CDs Instead of Stocks?

So I’ve got some cash in Vanguard to use, and I was hoping to use it to buy some stocks. The problem is, are there no good stocks to buy these days? I have a wishlist of companies, mostly your standard blue chip corporations. I don’t pay much attention to the stock market, but I know people have been saying it’s overpriced.

Here are some stocks I’d consider

Stock Price Dividend Yield
Bank of Nova Scotia (BNS) $58.14 3.93%
Proctor & Gamble (PG) $90.57 2.96%
Microsoft (MSFT) $64.98 2.40%
McDonald’s (MCD) $129.34 2.91%
Archer Daniels Midland (ADM) $45.58 2.81%
3M (MMM) $191.51 2.45%

We already own the first three, and I would add more shares of them. All of those dividend yields aren’t bad. But considering how highly those stocks are priced historically, I don’t know… Here’s a chart of the last 25 years in the S&P 500:

There’s the 90’s buildup, the 2000 crash, the 2008 crash, and the gains during the Obama years, and then the buildup after the Trump election. Does anyone else get nervous looking at that very last bit? I’m no Seeking Alpha nerd, so anyone who knows better, please speak up. To me, it seems like we’re bound for a downturn. Or a correction as they’re euphemistically called.

We’re still doing our usual retirement account investments, of course. As Vanguard says, you should stay the course and not react to market fluctuations. (This is usually followed by a silent “Praise Bogle.”) But I’m thinking of holding off on any more after-tax investments and putting that money into CDs instead.

Here’s Vanguard’s current CDs on offer:

Timeframe Rate
1 month 0.70%
3 months 0.90%
6 months 0.95%
9 months 1.00%
12 months 1.10%
18 months 1.50%
24 months 1.60%
36 months 1.85%
60 months 2.40%

Basically I’m thinking of parking some cash in a CD for 12 or 18 months, and once those mature, buying stock after a potential price correction? I guess this is a version of “playing the market,” which I’m not supposed to do (praise Bogle). But an 18 month CD pays 1.5%, which is almost as much as some of those stocks, and it doesn’t have the downturn risk.

The flipside is that CDs don’t have the upside potential of stocks. And though the stocks don’t pay huge dividends, the economy could keep improving and those prices could keep increasing. But like I said, most of our savings does go to stocks in our retirement accounts, so we would still catch any more upside there. What do you think using some CDs as temporary parking?

Laddered CDs for an Emergency Fund

While I was researching these CDs, I came across the concept of laddered CDs. Again, this is probably a concept I was aware of back when we did own CDs. Laddering CDs is a way to get CD returns in your emergency fund without having to potentially break a large CD and incur a penalty (usually some months’ worth of interest).

Bogleheads goes into depth on it, but basically to ladder CDs, you put the total amount you want invested across multiple CDs, so that one of them is always coming due within the next few months, or year at most.

So say you have $25,000 you wanted to invest. Vanguard’s 2.40% rate on their five-year CD is very appealing to you. Instead of investing it all for five years, you would split it up. You could put $5,000 into five different CDs, each lasting a different duration from one to five years. After one year, your first CD comes due. You re-invest that in a five-year CD. The next year, your two-year CD comes due, and you re-invest that in another five-year CD.

After five years, all of your money is invested at the five-year CD rate, yet it is broken up into discrete $5,000 blocks, so if you need it, you only need to break one CD (hopefully). And you are earning the difference the five-year CD rate (2.40%) instead of something like the one-year rate (1.10%).

I’m thinking of doing this for our emergency savings, but more conservatively than five years. I would max out at 18 months, and break it down into six CDs, maturing every three months. There is a big jump between the 12 month and 18 month CD rates, and they don’t increase much beyond that.

Vanguard’s Prime MMMF is paying more than it has over the past five years, but is still at 0.56% right now. With $25,000 invested, the MMMF pays $140 a year, but the 18 month CD pays $375. No one’s getting rich on that difference, but it seems like a risk-free way to make a few extra hundred dollars a year.

Have any thoughts on laddering CDs for an emergency fund?

Frugal Failure? I Bought A New Phone

It was almost a year ago when I published a breathlessly raving review of the hottest cell phone you need to own RIGHT NOW, the Nokia 2600. I received this cell phone as a hand-me-down over ten years ago. It could make and receive phone calls, send rudimentary text messages, and even had games like Bounce and Millenium Mission. And the best part was, the cost came out to only about $5 a month. I used it a handful of times each year.

Tracfone (2)Logically, I came to the conclusion that this Nokia 2600 was the only cell phone anyone ever needed. So it may surprise you to learn that, only a few months later…

Hell was freezing. Pigs were flying. And I bought a new cell phone.

Holy moley! After writing a jokey review and then an honest defense of my 11 year old cell phone, I bet the last thing you thought I’d do is upgrade. Me too. But things change. People change.

Let’s take a moment to remember the good times. Please, play this video and take a look back with me at some of the Nokia 2600’s finest moments. I can’t believe these days are over.

Anyway, the reason I had to get a new phone is that people want to text me. I’ve resisted the move to texting until now, because now we have tenants. And though my old phone was perfectly fine at receiving texts, it was crap at sending them. In fact, it couldn’t reliably send a text unless it was in reply to a message already received. So I decided for the good of my tenants and the quality of my landlording, I had to make a huge upgrade.

I spent $40 dollars to buy a new phone on eBay

This is technically the first cell phone I’ve ever bought, since my earlier one was inherited. Look, a real smartphone!

Moto E (5)

It’s a Moto E. The entire glass front is a screen and it works by using your finger to select things. Technology! Aside from making calls and sending texts, it can basically do everything a computer can do. You can get directions, look up restaurant reviews and see the score of your favorite sports team! Sports!

Want to see what I use it for? Let’s turn it on and see a portrait of an inept smartphone user:

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The End of Parking

You might’ve noticed on our Quarterly Expense Reports going all the way back to Q1 2015 that Marge and I have a monthly bill for parking that is almost $26. That’s all me.

Years ago, I was able to park for free when my office was in another location. But then we moved to Albany where parking is a hot commodity, so like everyone else, I started to pay for the privilege of parking my car. It’s taken directly out of my paycheck, almost $13 every pay day.

This was a bummer initially, because I had been enjoying free parking at our other location. Then, dangerously, I got used to it. I didn’t even think of it. Funny how recurring expenses quickly go from “burden” to “necessary.”

But now in our modern age of planning for Early Retirement, the parking expense has become harder to ignore. As I cut back on everything from pet insurance to newspapers, and from cell phones to rabbit litter, this one remains. Twenty-six dollars is not a lot of money, but in the land of eternal optimization, I am always looking to cut unnecessary expenses


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Is Pet Insurance Worth It?

Last Sunday, Marge scheduled a play date for Maeby at a local dog park. Maeby’s been to dog parks before without incident. She loves to sprint and run around for a few minutes, either letting other dogs chase her or chasing other dogs. Other than that, she stands around and watches. I don’t think greyhounds understand “play,” only running.

An ideal day out for Maeby is a solo run followed by enjoying some nature smells.

IMG_0423 TU

On her way out the door, Marge said, “I hope nothing bad happens.” I have no idea why she said this, and neither does she. I thought she was just worried about getting lost on the way to the park since this was a new one she’d never been to before. Well, they made it there fine, but something bad happened anyway.

Right after arriving, Maeby ran off with some other dogs. And when she came back, someone said, “What is that on your dog’s side?” And Marge said it was a scar, because Maeby has always had a scar on her side since we adopted her six years ago. It’s slowly grown hair and you can’t really see it anymore. But this was on the other side. Maeby had a fresh new gaping wound.

Maeby stitches (2)

Post stitches

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Keeping Birthdays Frugal

Well, it was my birthday quasi recently. Actually, it was two months ago. But that doesn’t matter. “Recently” is all in the eye of the beholder., right? The point is that I had a birthday relatively recently, and hasn’t everyone had a birthday relatively recently?

There’s always an urge to go all out and “treat yourself” for your birthday, or treat your spouse on their birthday. Treat your six kids on all of their birthdays. But in the early retirement lifestyle, all things must be kept in check, and that includes birfdays. You can splurge, but within reason. And at this point in our life of eternal optimization, it takes very little to feel like a huge splurge!

Here’s what we do on birthdays to make it fun and keep our savings in checl:

Eat Whatever You Want!

After abolishing Takeout Fridays, Marge and I hardly ever eat out or get takeout. We’re not lazypants, we like to cook food for ourselves. It definitely costs less, although I refuse to accept the notion that cooking is inherently healthier than eating out. It’s all in what you make of it (the food), but let me say this: Making our own meals definitely means less sodium intake. There’s so much salt in food out among the English. The only times we do eat out is when traveling to fantastic places… and on our birthdays! And on birthdays, all rules are out the window.

Flying ChickenUsually these birthday meals turn into birthday meal weekends. How exciting it is to pick out a favorite home-cooked meal from the past or something from one of our favorite area restaurants. For the past few years, my birthday dinner has been fried chicken and waffles from a local place.

I still managed to especially frugalize this birthday. I was all set to order the fried chicken dinner and noticed on their website that they are now on GrubHub. That’s an online ordering platform, I guess, but the point is that I could get $7 off my first order since I’ve never used the service before. Seven dollars is worth like two fried chicken thighs and a drumstick! Sign me up!

Birthday Beers 2016My other special birthday treat is a handpicked six-pack of craft beer. This is basically the only time I’ll buy a six pack during the year. Maybe one other time if I’ve really “earned” it through DIY work around the house.

Birthday BreakfastSpecial birthday meal for me usually extends to Sunday breakfast as well, which usually means fried eggs, corned beef hash, bacon, and a couple apple cider doughnuts from a local baker. It’s your birthday! Treat yourself! And the treats don’t end there!

Customized Birthday Cake!

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Leaving It To The Professionals

Last week, part of our ceiling collapsed.

Tub Drain Leak (6)

It’s not as bad as it sounds. It was a drop ceiling in the one room in the house that still has that. A leak sprung from our second floor bathtub’s drain pipe and started water soaking into the big drop ceiling tile. The tile got so saturated with water that it collapsed to the floor. Luckily, we have two bathrooms, so we can just use the other shower while we fix the drain pipe.  No buckets for water collection necessary!

I got up into the drop ceiling to see what was up, felt around pipes and found exactly where the leak was: Where a metal pipe fits into a PVC pipe. So I got out my wrench, gloves, and bottle of Blaster to try and and take apart the pipes.  (It turns out you’re not supposed to use Blaster on PVC anyway, kids!) After stinking up the place with Blaster and rubbing my fingers raw trying to get the pipes apart, I had a flashback…

Tub Drain Leak (2)

The culprit

A few years ago, one of the toilets wouldn’t stop running. The water would keep running through the tank. The seal wasn’t tight anymore. So I attempted to fix it. But this toilet was so old that the style of flushing mechanism (technical term) wasn’t manufactured anymore, so I couldn’t buy a replacement part.  Instead, I had to take the whole thing apart, take out the whole flushing thing-a-majig, and put in a new one.

Each screw was excruciating to take off. The toilet probably hadn’t been taken apart in forty years, when it was made. The screws were rusted in place. I spent weeks trying to slowly get the thing apart. I eventually did it, but was a trying experience.

With this drain pipe in the ceiling, I could suddenly see the same thing happening. I saw myself spraying Blaster up there after work, night after night, and pathetically trying to yank the pipes around in their little enclosed area, then probably having to buy tools that I might or might not ever use again.

So instead, I decided it was time to call the professionals. Marge called a guy the next day, he came over a few houes later, and by 5PM, it was fixed. And our pockets were lighter by $149. Ouch!

Call it a Frugal Failure, but sometimes I think it’s worth it to go to the professionals. We paid up to get the bats permanently out of our house last year. Whenever a job takes specialty knowledge, expensive tools, or is obviously going to take us forever to get done, I consider them.

Other times I look to professionals instead of DIYing it

Certain types of food. I’ve never tried making my own beer or wine. I know people do it. And I imagine it tastes somewhere on the scale from “okay” to “something died in this.” But there are people who spend their lives dedicated to the alchemy of alcoholic drinks. I could try to learn some things and waste my time buying equipment and making my own barely palatable swill. Or, for the few times a year I buy beer or wine, I could just go to the experts who live and breath this stuff and buy something that has been tested and judged to be nummy by all.

Birthday Beers 2016

Birthday Beers 2016

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What Do You Do With Excess Cash?

For me, frugality is a never-ending game of optimization. I’m always looking for ways to either cut costs or get more out of my money. This leads us to do weird things like cancelling the newspaper, cancelling the cable, buying wood stove pellets instead of rabbit litter, and either riding a bike or taking a bus to work. (ed: Self hyper-linking skills are on fleek) The way I’ve forced myself into this position over the years is by promising to always increase our monthly savings as measured in Quicken.

Forced Savings

From the time Marge and I moved in together, our savings plan has basically been this: Force a certain amount of savings per month by using automated investing. Money disappears from our checking account before we even notice it was there, and it escapes to a investment vehicle where it goes to work for us. The investments happen on a weekly basis to maximize dollar-cost averaging.

We started this back in 2006. I arbitrarily picked $1,000 as a savings goal for the month. When it became clear that this was too easy a hurdle, I pushed it up to $1,500 a month. Once we hit that goal for three months in a row, we increased it $100. And we’ve followed that model ever since. The amount of monthly forced savings has increased $100 or more every three months.

Now we are at $4,000 a month. As you can tell, I’ve found this method to be really effective. Every few months, we have to optimize, because the money just isn’t there! The savings must be found.

To be honest, some of this is only short-term savings. Some of the savings are used as a DIY escrow account to pay for our property taxes and home insurance, or if we owe any income taxes at the end of the year. All other expenses flow through the monthly expenses and count against that $4,000 number.

And since months can be lopsided, I sometimes have to push expenses ahead a month or two in Quicken, or push income back, to make that average savings goal appear. Funny math, but you get the picture. Regardless, that monthly savings goal is being forced into savings using automatic investments either through our workplace retirement plans or Vanguard accounts every month. If there is a temporary cash shortfall, I keep $3,000 as a buffer in a savings account.

Then every once in a while, there’s a monkey wrench thrown into the works. We get three paychecks instead of two. A tax refund. Some unexpected income shows up and I’m at a loss of what to do with it. And we are having some of those days again. Oh, joyous days! Continue reading

Our 2015 Savings Rate

Savings rates are great. How much money do you need to live vs. how much money do you make? Are you kidding me? That’s a perfect measure of how efficient you are behaving! I am a fan of savings rates.

What I’m NOT a fan of is calculating savings rates. What do you include as an expense and what don’t you include? Do you include 401(k) contributions as income? Is the whole debt payment an expense or just the interest part? Is home maintenance an expense or an asset?

Everyone seems to have their own method of calculating their savings rate, and just to muddy the waters, I’m going to introduce my own!

Unrelated picture of rabbits

Unrelated picture of Cornelius & Klaus

Expenses: Here’s our 2015 expense report. For this report, I will exclude the principal payments on debt and include only the interest portion as an expense.

Income: Here’s where it gets complicated. This will be all of our take-home income, after everything gets taken out, with our 457 and 401(k) plan contributions added back in… but at 60%.

I know, I know, it sounds crazy. But hear me out. We can safely assume that if we had been paid those contribution amounts as income instead of putting them in tax deferred accounts, they would have been taxed at a 25% federal rate, plus state taxes and various payroll taxes. So let’s estimate that 40% would disappear before it hit our bank account. By adding back the contributions as income at 60%, we are mocking up what our take-home pay would have been if we took our entire paychecks home.

But what about our rental property? I am excluding all of our rental property income and expenses because I like to treat that as its own self-supporting business, separate from our personal spending. And the way I see it, the rental is an investment, so all of the start-up costs we endured this year (down payment, closing costs) are by default included as savings, same as if we had invested it in the stock market.

Caution – I will be showing you our after-tax income! Since it’s inherent in any savings rate calculation, I know you’d just be doing it in your head anyway, so why not just include it.

I can never think of any good pictures for these number-based posts…

Goats in Trees

So here’s a picture of a goat calendar.

From our annual expense report, we know that…

Expenses Excluding All Debt Payments = $35,373.10. Now add…

Interest Paid On Debt

Mortgage Interest $2,413.02
Student Loan Interest $172,18
Car Loan Interest $85.52
Total $2,670.72

So for our purposes, Total Expenses, Less Principal Payments = $38,043.82

We put almost $20,000 into tax deferred accounts (would’ve been more if it weren’t for Marge’s terrible 401(k) choices!), so our mocked up After Tax Income is $89,354.48. The difference is our savings at $51, 310.62.

Savings Rate = Savings / Income = $51,310/$89,354 = .574

So our Savings Rate is 57.4%! I was hoping to hit 50%, so I’m happy.



Another utterly irrelevant picture

Hey kids! Here’s a lesson I wish someone had taught me years ago. Through determining your savings rate, we can discover how many years it will take until your investments will cover those expenses, and you can retire! Incredibly, there is a formula for that and it works.

Mr. Money Mustache teaches us that a 57% savings rate means you only have to work about 14 years until your assets support your lifestyle.

Here’s a fun chart



What does the average Joe save?

The Federal Reserve keeps stats on this. Ever since the early 1990s, the average individual’s savings rate has hovered around 5%. During one month (December 2012) it peaked at 11%, and the highest the savings rate has been in the observable past is 17% in May 1975. I got you beat, Average Joe! I beat your ass two time! Three time!

At a 17% savings rate, you’ll still have to work for 40 years like a sucker before you can be financially independent. And at 5%? Well, I don’t even want to think about it! If you save 5% of your income, you’ll hopefully be relying on a pension or Social Security, or else be enjoying a restful retirement from the grave.

What’s your savings rate for the year? What convoluted method did you use to calculate it?


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